JBJ WealthGroup_S2 Workbook

JB&J Wealth Group
S2 WORKBOOK
Decisions and Notes for
Modules 1 – 5
BSMARTer
Business Simulation Management
and Relationship Training
MODULE 1
Organizational Structure
and Compensation
Service Team Structure
YOU
Please see Page 1 of the Appendix for the
Organization structure (i.e. how this
Service Team ‘fits’ into our organization
Your primary contact for
all matters related to
your wealth
PARTNER /
LEAD ADVISOR
Works directly with your
Lead Advisor and you to
execute on your specific
needs
ASSOCIATE
ADVISOR
Supports your Lead
Advisor, Associate
Advisor and you
ANALYST*
Internally assists the
Lead Advisor and
Associate Advisor Team
in all operational matters
CLIENT SERVICE
ASSOCIATE
(To Be Hired)
* The JB&J Briefing Book suggests the creation of the Analyst role, listed above
2
Service Team Structure
Provide an explanation of your service team structure.
We want employees to work better as a team and are making changes to how we work with clients
and each other. These changes will enable us to better serve our end clients and create career
paths for associates (this will also enable succession planning).
Partner/Lead Advisors-Initially, the Partners/Lead Advisor and COO will all have dotted lines into
each other. Please refer to organizational chart. Eventually, all advisors will report to Beth. The
Partner/Lead Advisor is responsible for the client relationship and acting as a quarterback on all
matters. The Partner/Lead Advisor will work closely with the Associate Advisors and Analysts as
appropriate.
Associate Advisors- will report directly to Beth but will have a dotted line to the partners. Each
end client will have their stable team of Partner /Lead Advisor and Associate Advisor and there will
not be a situation where a Partner/Lead Advisor only works with one specific Associate Advisor.
This structure will help in breaking down the silos and moving the firm from what is really a
fragmented business to more of a practice. It will also enable the firm to determine the best fit in
terms of coverage of Associate Advisor for a particular end client. Associate Advisors are to be
brought into client meetings to encourage relationship building and demonstrate to the end client that
the firm provides a team based approach (versus an individual). Associate Advisors need exposure
to on the job experiences and training and these meetings will be instrumental in their development.
In client meetings, the Associate Advisors will assist the Partners in running the meeting. They will
take notes on the meetings, and play a key role in keeping track of the follow-up items and
resolution. They will be engaged in coming up with solutions to client issues and will communicate
with end clients with the support of the partner as appropriate (depending on complexity and nature
of issue).
Analyst (new role)- The briefing assignment for our firm also suggests that the Associate Advisors,
Kelly and Lillia are too senior for data entry and drafting. In response to this need the firm will
create an Analyst role and will hire 2 initially. The Analysts will support all of the Lead Advisors and
Associate Advisors and will be a pooled resource, reporting to Beth as COO. The Analyst’s career
path may lead to an Associate Advisor and Lead Advisor role or possibly a career path to an
investment role(if the firm eventually elects to have an investment team and CIO).
Client Service Associate (CSA)- Currently, there are CSA’s supporting the client within the service
team structure. The CSA’s role is largely internal, supporting operational type activities such as new
accounts, transfers of assets, wires, distributions. In certain cases, the CSA’s may have client
interaction. The CSA’s will report directly to Beth/COO. Given that there are 3 CSA’s, and may be
more, we propose the creation of a Lead CSA role as a career path. This would not be a managerial
role but a coaching /coordination role.
3
Compensation
Benchmarking
Resolve the issue of compensation between Lillia and Kelly
Position
Salary
Bonus
Total
Kelly’s
Compensation
$140,000
$20,000
$160,000
Lillia’s
Compensation
$87,000
$13,000
$100,000
Benchmark
Benchmark
Median
$65,000
$9,720
$74,720
Benchmark Third
Quartile
$84,000
$15,000
$99,000
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
4
Compensation
Benchmarking
What changes, if any, will you make to compensation?
Based on Compensation tables for an Associate Advisor, we realize we have overpaid Kelly
for her current role. We have also determined that Lillia is paid in line with her current job
responsibilities. Reducing Kelly’s salary and/or increasing Lillia’s salary are not options we
feel would benefit either individual at this point in time.
Given Kelly’s resume (graduate of Wharton/Master’s in Finance/CFA and CFP) coupled with
her focused client engagement, we feel she is in-line to be promoted to a Lead Advisor role
within JB&J Wealth Group. We will also be working on a development plan for Kelly so she
has a career path opportunity to eventually become a partner.
With that said, we will work on a development plan for Lillia in order for her to advance within
the firm as a Lead Advisor. Lillia is very well liked by clients however she needs to broaden
her experience within the industry and organization. If Lillia chooses this as her career path,
we would encourage her to obtain her CFA which would help build a case for increasing her
salary to be in-line with a Lead Advisor role.
Addressing this ‘compensation issue’ sets the stage for changing our culture. We pay in the
3rd quartile and always want to attract and retain the best talent. We have a range based on
credentials and we have multiple career paths (Associate Advisor vs Portfolio Manager/Lead
Advisor). Furthermore, we align pay with key job responsibilities and performance.
As partners, we have also had a very candid discussion with Kelly regarding the disclosure of
her salary with other members of our organization. We have reiterated with her that this is
very personal and confidential information that should not be shared with others at the firm
(other than Partners).
5
MODULE 2
Staff Selection and
Performance Management
Performance Evaluation
Design a performance evaluation form. Follow the worksheet.
(20 minutes)
Job Factor
1.
General
Competencies
Explanation
Has a strong knowledge of clients, industry, reporting system and other
interfaces. Conveys ideas and facts using language the audience will best
understand. Can describe customers’ interests and expectations. Shows
interest in, anticipates, and responds timely to customer needs. Makes timely,
informed decisions that take into account the facts, goals, constraints, and risks.
2. Productivity
Performs responsibilities in an accuracy and efficient manner. Consistently
meets and exceeds deadlines. Promotes cooperation and commitment within a
team to achieve goals and deliverables. Consistently seeks feedback and acts
on it. Develops fresh ideas that provide solutions to all types of workplace
challenges
3. Dependability
Takes personal responsibility for the quality and timeliness of work, and
achieves results with little oversight. Shows up to work on time, and follows
instructions, policies, and procedures. Meets productivity standards, deadlines,
and work schedules.
Notes
Employees receive a formal review after 90 days in the role (end of introductory period ) along with a
mid-year review in July and a annual review in December.
Client Service Administrators are internal support to the partners and associate advisor team in all
operational matters. CSAs are responsible for preparing client paperwork, reports, maintaining
contact with clients to provide or obtain updated information, scheduling meetings with Advisors and
troubleshooting issues as they arise. We expect CSAs to have great attention to detail, the ability to
work on multiple projects concurrently and thoroughly, the ability to work under pressure, and to be a
creative problem solver and results focused individual.
Describe how the forum will be used.
Please see the Appendix Page 2 which depicts the actual format that will be used at JB&J.
6
MODULE 3
The Culture of Your Firm
Organizational Culture
“The thing I have learned at IBM is that culture is everything.”
Louis V. Gerstner, Jr. former CEO IBM
This quote from one of our first Fortune 500 clients exclaims the importance of our initiative
to refresh our culture. When the founding partners started JB&J, we had a culture defined
by a shared vision and a zeal for exceeding expectations. Each of us worked tirelessly and
endlessly to bring over our clients (our individual books of business) which resulted in the
establishment of our business, but one with an individualistic bias. Nonetheless, that
individualistic phase of growth was successful as we have established ourselves as the
premier Wealth Management firm in the northeast; albeit, a collection of lead advisors acting
independently (silo’s).
It is now time to transition to the next phase of growth; an ensemble practice. We will be
shifting from individual agendas to a collective behavior that focuses on team goals. When
the founding partners started JB&J, we were united because we were focused on growth
and the continuity of the firm. We were scared and that was a good motivation. It is time for
us to become an ensemble practice that is growing and sustainable; collectively greater than
the sum of us individually. As Owners, we established the ‘individualistic’ culture; therefore,
as Owners, we must establish the ‘ensemble’ culture.
We will lead by changing our behavior, communicating the cultural change, and holding each
other and our employees accountable.
Note: A guiding benchmark for evaluating our Firm continues to be the Fidelity
Benchmarking Study Results. See Page 3 of the Appendix to compare JB&J with High
Performing Peers with assets > $500mm.
7
Organizational Initiatives
to change Firm culture
As Partners, we recognize that changing the culture starts with us. Therefore, for the culture
to change, we will work together (as a Team of Partners) and do these 5 things:
1.
2.
3.
4.
5.
Change Partners compensation.
a. The structure will be salary + bonus + dividend.
i. As we are not growing (and this is a strategic objective), a bonus will be
paid for organic growth.
b. Change the Partners Performance Evaluation process to include Enterprise
responsibilities that are aligned with strategic objectives.
Begin a bi-weekly informal ‘All Hands Brown Bag lunch’ in our conference room. This
will be an opportunity for Service Teams (by Partner) to share best practices, lessons
learned, interesting client requests, funny stories, etc. Our hope is that this will unify
our company, build camaraderie, and demonstrate to our employees our commitment.
Establish a career path for COO, Beth Springsteen.
a. Align her responsibilities and performance with the opportunity for ownership.
i. This will demonstrate to the employees that there is a path for nonfounders to become an owner.
Incorporate a Bonus Pool for the COO (COO will be eligible up to 50% of pool). The
COO will distribute the remaining 50% of the pool at her discretion. This will be a pool
that all employees are eligible. It will be a percentage of profits before paying Owners.
a. This is an iterative step in helping Beth transition from COO to CEO.
b. This should align individual performance to team goals (profitability).
c. This will also provide transparency to employees concerning firm profits.
Change our Service Team structure to break down ‘silos’ by establishing a cross
functional pool of resources. This will also allow us to establish career paths for
employees, including the opportunity for potential ownership.
a. Align roles, responsibilities, and performance with compensation structure.
Initially, we are addressing this by dealing with the disparity of pay and roles /
responsibilities between Kelly and Lillia.
b. Cross functional teams will change the culture because we will no longer have a
Partner aligned with just one support person..
8
MODULE 4
Incentive Compensation
Incentive Compensation
Design COO, Beth Springsteen’s, Bonus Plan
Since Beth is not a current owner of the firm and doesn’t manage clients, we have decided
to structure her Bonus Plan based on the following 2 components.
1) Overall success of the firm (note: financial metrics are preliminary and will be
discussed in greater detail):
•
Asset Growth - Net New Assets of 10% growth net of market.
•
Increasing Revenue - 10% from all sources including market.
•
Profitability – minimum of 25% profit after fair compensation to owners or EBOC over
50%.
•
Client Retention - >97% net of deceased clients or individuals who move away.
•
Valuation increase – 15% and we plan to value our firm on an annual basis.
2) Individual Performance: Each component scored by the Partners on a scale of 1-10.
•
Staff Development
•
Strategy of the Firm
•
Productivity of the Firm
•
Increasing number of new clients/referrals
Beth’s salary has been increased to $225,000 and we would like to incorporate an Annual
Bonus based upon the above criteria. Beth will be evaluated by all the Partners and
measured on the success factors we have defined for the growth of our firm. They will also
incorporate a review of her current job responsibilities as defined in our Appendix, Page 4.
The Bonus Pool will be equal to 25bps of Gross Margin and Beth will be eligible to receive
up to 50% of this Bonus Pool.
9
MODULE 5
Partner Compensation
Partner Compensation
Set the base compensation for your partners.
JB&J Wealth Group is a sophisticated and well-regarded Wealth Management firm in the
northeast. Our legacy clients are influential Fortune 500 executives further establishing our
brand. We have been – and will continue – to be the premier Wealth Management firm in
the northeast. This draws top talent to our firm; essentially, we are a ‘talent magnet’.
Despite being a talent magnet, we have not been a good steward of these rich resources.
As Partners, we did not make the transition from starting / growing our individual books of
business to collectively growing / establishing an Ensemble Practice. The result of that is
that we now have a ‘silo business’ with segmented support resources.
For us to restore our founding culture of a shared vision and zeal for exceeding
expectations, it must start with us Partners aligning our roles/responsibilities to how we get
compensated.
Each Partner will be compensated according to the following formula: Salary + Bonus
+Dividend. Our compensation structure will set the example for all our employees.
•
Salary: Partner salaries will each be $300,000. Historically, Partners have had
different contributions in adding clients and managing the business so now each
Partner will lead a functional aspect of our Practice as noted below:
o John Jacob – leading /defining the Succession Plan (acting CEO)
o Rachel Bonow – leading / building the Investment offering (acting CIO)
o Tico Jordan – leading / building the Estates offering
o David Torres – leading / building the Tax and Accounting offering
o Alice Cooper (5% owner) – lead Advisor (note: he is also paid above the 3rd
Quartile for a Lead Advisor with a salary of $150,000)
10
Partner Compensation
Set the base compensation for your partners.
•
•
Bonus: Partner and Advisor bonuses will be established. These bonuses will be paid at
50% of Year One revenue for new assets brought to the firm. This is a huge change
and we expect this to be a catalyst to prioritizing growth; thus contributing to the culture
change of the firm.
Dividends: Dividends (function of EBOC) will be paid based on % ownership.
The changes to Partner compensation are significant.
1.
2.
3.
It establishes the structure and leads the change from an individualistic culture to an
ensemble practice; one that can secure a higher valuation multiple.
It aligns salary to roles and responsibilities that will be evaluated by peer Partners and
Beth (as COO and eventually as CEO). It separates management from ownership and
ultimately will produce a more efficient firm.
It is also an incremental step towards Partners not taking all the profits out of the
company; rather establishing a structure that can invest profits back into the people
and the firm.
Since these changes to our compensation are significant, we would be negligent if we did
not take the effort and time to model these assumptions into our financial projections. On
the next page you will see our actual financial projections. These projections will show that
each of us as Partners will earn more income. Furthermore, the assumptions (listed after
the spreadsheet) will show that we are executing the transition to an ensemble practice from
a ‘silo-focused’ business. We are all well aware that premium valuations are given to large
ensemble practice (approaching $1B) so arguably each of our net worth will increase
significantly.
11
12
Assumptions

New Asset growth projections (also new client growth) are based on actual
Benchmarking projections detailing yoy growth of 0%, 5%, 9%, and 18%.

Rev bps will stabilize at 85 bps because our focus on clients with private
companies will require complex tax, estate planning, etc that generates
higher fees.

Beth (COO) will have an immediate salary increase of $75,000 to bring her to
the 3rd quartile. Eventually, her salary will be increased to a CEO/Partner
(keep fingers crossed)

We will add 2 Analysts/Portfolio Managers earning 3rd Quartile compensation.

A Bonus Pool will be established for all employees that will equal 25bps of
gross margin. The COO will be eligible up to 50% of this Bonus Pool and will
have the discretion to distribute the remaining Bonus Pool as she sees fit.

A Bonus for NEW Assets will be established. In Year One, we will pay 50% of
revenue for NEW assets.

Annual salary increases are extrapolated at 10%

Annual cost increases are extrapolated at 5%.

Beth and Alice will be Partners by 2017 receiving Partner compensation

Organization chart was referenced for employee numbers.
13
Other Initiatives
Describe any other initiatives you will undertake as a firm. These
may be outside of the scope of compensation and people but may be
important parts of your case.
Initiative
Explanation
1. Define Partnership (ownership) criteria and
evaluate whether Beth should be offered.
This provides a career path for Beth and
establishes a culture within the firm that there is
a path to ownership.
Notes
This will accomplish two things. One, it will
demonstrate to us (as Owners) and to our
employees that we are being successful at
transitioning from a silo practice to an ensemble
practice. Two, it will establish a value for new
partners.
3. Establish Marketing / Growth Initiatives
focused on leveraging Founders relationships to
build Associate Advisors book of clients.
Now that we have promoted Kelly, it is
necessary to help her become
successful. Furthermore, these efforts should
also be focused on Alice because Benchmarking
data reveals that he is below capacity.
2. Initiate a third party independent valuation of
the firm.
Now that Kelly has been promoted to a Lead
Advisor, we have a gap that needs to be filled.
4. Hire two new Analysts.
14
Appendix
Organization Structure
John
Jacob
Rachel
Bonow
Tico
Jordan
Partner /
Lead Advisor
Partner /
Lead Advisor
Partner /
Lead Advisor
David
Torres
Alice
Cooper
Partner /
Lead Advisor
Partner /
Lead Advisor
Beth
Springsteen
CEO/COO
Sal Jones
Admin Asst
Kelly Zorn
Lead Advisor
Lillia Pennington
Associate Advisor
TBH
TBH
Analyst
Analyst
Arnie Rockwell
Gabby Crocket
Eddie Raye
CSA
CSA
Lead CSA
Note: currently Beth is a COO. Our
hope is that she will transition to
CEO/Partner. In the interim, she
reports to all the Partners.
Larry Ross
Office Manager
Joan Teal
Technology Officer
1
Performance Evaluation
Template
2
Benchmarking data for
HPF > $500mm
3
COO Job Description
4